Should firms employ personalized pricing?

Matsumura, Toshihiro; Matsushima, Noriaki

Institute of Social and Economic Research Discussion Papers, 2013, 869

Number of Access:298（2025-07-24 04:23 Counts）

Identifier to cite or link to this item: https://hdl.handle.net/11094/24918

Item Information

Output File Export EndNote Basic Export Mendeley

Title
Should firms employ personalized pricing?
Creator
NRID
1000070263324 1000070263324
CreatorName
Matsumura, Toshihiro
NRID
1000080334879 1000080334879
ORCID
0000-0002-7865-3875 0000-0002-7865-3875
researchmap permalink
read0116301 read0116301
Scopus Author ID
7005645778 7005645778
CreatorName
Matsushima, Noriaki
Subject
personalized pricing
heterogeneity
cost reductions
game theory
Abstract
The recent developments in information technology (IT) have enabled firms to employ personalized pricing. Should all firms employ personalized pricing even though the adaptation costs of such pricing strategies are not high? This paper theoretically demonstrates a situation in which all firms do not always employ personalized pricing even though the fixed costs to do so is zero. The model is based on those of Thisse and Vives (1988) and Shaffer and Zhang (2002). Our model incorporates the fact that firms engage in marginal costreducing activities after they decide whether to employ personalized pricing. As employing personalized pricing induces the rival firm to engage more in reducing its costs, to mitigate the cost-reducing activities of firms, the less-efficient firm should not employ personalized pricing. Our main result indicates that such firms should take into account their relative competitive positions and technological environments. When firms are small, they would need to reconsider whether to employ personalized pricing.
Publisher
The Institute of Social and Economic Research, Osaka University
Source Title
Institute of Social and Economic Research Discussion Papers
Volume (Issue)
869
Date of Issued
2013-03
Language
English
Handle URL
https://hdl.handle.net/11094/24918
Relation.references
URI
https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2013/DP0869.pdf
Access Rights
metadata only access
Category
ディスカッション／ワーキング・ペーパー DP/WP
Institute of Social and Economic Research Discussion Papers